Do Black Swans Really Matter? Not As Much as the Circle of Life, The Circle Purposely Disrupted By Multiple Central Banks Worldwide!!!

With all due respect to that NassimTaleb dude who popularized the term "Black Swasn", Black Swan events are both overrated and the term is sloppily bandied about by those who may not be putting the requisite thought into just how utilitarian the knowledge of Black Swans actually are. Since you can't accurately predict, nor back test against, nor adequately hedge against such events, exactly what good is a Black Swan discussion. Well, I can answer that question. Black Swan events do maximum damage when the economic cycle is at its weakest. In Reggie Middleton's Economic Circle of Life (think the Lion King) it is the right portion of the circle in which Black Swan events do the most damage.

Actually, it is not the Black Swan events themselves that do the damage but said event do serve as the catalyst that either bust a bubble that was waiting to pop anyway, or break a structure that was hobbling along on one leg as it was - where we happen to be now in many places of the developed world - sans rampant propaganda, misinformation and disinformation from less than disinterested sources.

I have always been of the contention that the 2008 market crash was cut short by the global machinations of a cadre of central bankers intent on somehow rewriting the rules of economics, investment physics and global finance. They became the buyers of last resort, then consequently the buyers of only resort while at the same time flooding the world with liquidity and guarantees. These central bankers and the countries they allegedly strive to serve took on the debt and nigh worthless assets of the private sector who threw prudence through the window during the "Peak" phase of the circle of economic life, and engaged in rampant speculation. Click to enlarge to print quality...

The list can go on. The most likely catalyst is described as follows...

The advice coming from both the government agents (ex. central bankers) and those whom these government agents have pledged to rescue at the absolute cost to the average tax payer (the FIRE sector, particularly the banking cartel) has been absolutely horrendous. First let's take a look at the most respected of these agency protected players - Goldman Sachs. From my missive, Is Another Banking Crisis Inevitable? posted last month, I excerpt the following:

The U.S. bank that makes the most revenue from trading advised investors to take an “overweight” position on banks, raising its previous “neutral” recommendation, according to a group of equity strategists led Peter Oppenheimer. Investors should pay for the trade by lowering holdings of consumer shares, he wrote.

“For financials the narrowing of sovereign spreads in peripheral eurozone, which our economists expect to continue, is a clear positive,” London-based Oppenheimer wrote in the report dated Feb. 3. “Banks are one of the least expensive sectors in the market and the trade-off between their growth prospects and earnings in the next few years looks especially attractive.”

So where is the risk?

The impact of the Asset Securitization cum Sovereign Debt Crisis to bank balance sheets should become the market and media focus. The full cost of cleaning up the balance sheets of financial institutions particularly against the backdrop of adverse macro shocks emulating from sovereign defaults is not fully known. Structural weaknesses in sovereign balance sheets could easily spill over to the financial system due to the fact that most banks are stuffed to the gills with sovereign debt – highly leveraged, and marked as risk free assets at par. This can have broad, adverse consequences for growth in the medium term.